economics 3.2 : low unemployment

what is employment?

the use of labour in an economy to produce good and services

what is the term that describes that all those willing and able to work are in paid employment at the current wage rate

full employment

what is the key phrase in the definition of employment

willing and able

why is full employment unlikely?

frictional and seasonal unemployment is unavoidable

what is a more realistic aim in comparison to full employment?

low unemployment

what is the definition of unemployment?

when workers who are willing and able to work are unable to find employment

loads of people are inactive(ill health) or have left the labour market(retired)

what is one method we can use to measure unemployment?

the claimant count: measures the number of people claiming unemployment benefits. e.g job seekers allowance

whats the equation for unemployment rate?

unemploed/workforce x 100

if the unemployment rate is 67% and the workforce is 9447 what is the number of unemployed

141

name five causes of unemployment

seasonal; frictional; structural; technological; cyclical

what is cyclical unemployment?

unemployment caused by movements in the business cycle e.g when demand falls in the economy

what is seasonal unemployment?

unemployment created by changes in weather e.e a ski instruction in peak summer weather

what is frictional unemployment?

unemployment caused by someone moving between jobs. this is why full unemployment is unachievable.

is frictional unemployment good?

yes because someone is allocating their labour in a more efficient way meaning they will have better productivity.

what are the bad consequences of unemployment?

wasted resources: leads to environmental damage

lower living standards

excluded workers

costs to taxt payers

a budget deficit

regoinal problems: depressed areas where nobody wants to live=property value down and more crime

social problems

is there anything good about unemployment?

could put downward pressure on wages because there’s more job competition(good for producers)

lower costs could increase competition

what does classical unemployment mean?

where the labour market doesn’t equate to the equilibrium (demand does not equal supply)

this causes a labour surplus= unemployment

what causes classical unemployment?

national minimum wage

trade unions- negotiate wage rates above the national market clearing equilibrium leading to an excess in labour supply.

labour immobility : due to geography-unable to physically move

or occupational- workers don’t have a range of skills

whats the solution to cyclical unemployment?

boost demand

whats the solution to seasonal unemployment?

retrain workers

whats the solution to structural unemployment?

retrain workers

whats the solution to frictional unemployment?

no solution needed

whats the solution to classical unemployment?

education and training/ build more houses

whats the solution to technological unemployment?

retrain workers